Has Downturn Provided ‘Protective Cover’ to Top Equity Partners?
The economic downturn that left new law school graduates with dismal job prospects appears to be benefiting equity partners, especially those at the top.
Now there are fewer lawyers doing more work, and it’s helping boost partner pay, former Kirkland & Ellis partner Steven Harper writes in a column for the Am Law Daily. There is more work to go around as law firms hire fewer new lawyers than in previous recoveries. At the same time, firms admit few new equity partners, increasing profits for those who made the cut.
Life is especially good for those at the top, Harper notes. One management consultant, Kristin Stark of Hildebrandt Baker Robbins, told the Recorder last fall that the difference between compensation for top and bottom equity partners is growing larger. Before the recession, the average spread in high-to-low partner compensation was typically 5-to-1, Stark said. Now the spread is 10-to-1 or even 12-to-1.
Harper sees that difference as “stunning.” He says it’s likely that average partner profits for 2010 will see another gain, after a slight increase in 2009. “As the economy continues to sputter and young law school graduates worry about their prospects, overall average profits per equity partner will follow their steady upward trajectory,” he predicts.
“The growing spread between highest and lowest within equity partnerships—coupled with the plight of everyone else—may reveal that the worst economic downturn of modern times has provided protective cover to greed atop the pyramids.”
